But the results also raised some flags, particularly on pricey promotional costs, the ongoing battle to jumpstart sales in the U.K. and a disconcerting count of outstanding shares.

McDonald's
MCD, +0.48%
shares tracked lower throughout the session, ending it at $34.60, off 48 cents, or 1.4%.

Oak Brook, Ill.-based McDonald's, the world's largest hamburger maker, said it earned $625.3 million, or 49 cents a share, compared with last year's profit of $727.9 million, or 56 cents a share, a year earlier.

Total sales jumped 6% to $5.10 billion. Same-store sales, an important industry measure of receipts rung up at stores open longer than 13 months, rose 5.2%. March marked the 36th straight month of solid gains overall, with the dominant U.S. results helping to offset weakness in Europe. The results were in line with Wall Street's expectations.

Same-store sales in the U.S. business clipped 6.6% higher on top of last year's 5.2% gain, fueled by a strong response to its premium roasted coffees, newly packaged and marketed, that helped drive the breakfast business.

"We had some breakfast rejecters, if you will, who didn't think our coffee was as good as it should be," Mike Roberts, president and chief operating officer of the fast-food chain, told analysts in a late-morning conference call.

"Now that it is, they're coming back," he said. "The opportunity here is enormous."

The restaurant chain also continues to keep its menu fresh with new salads, including the recent launch of the spicy-chicken premium sandwiches and next week's introduction of an Asian salad.

Roberts told analysts that the U.S. food pipeline is full with more chicken options and a greater number of beverage choices that include juices and flavored water. And breakfast might get a jolt of another kind: a "big burrito" is making its way through test kitchens, he said.

Struggles overseas

But Europe, the second-largest marketplace for McDonald's, is still a struggle as sluggish sales and labor issues in the U.K. are dragging down strong sales in France and Russia, and an improved performance in Germany.

Comparable-store sales did manage to rise 2%. That was softer than last year's 2.9%, but Roberts called it "progress" considering that the fast-food industry there is in a slump. France, for example, turns in some of the highest margins in the world, he said, as consumers gobble up the value menu, the Big Tasty and the region's Mythic chicken sandwich.

France also has a colorful chief executive in Jean-Pierre Petit, who holds live Internet chats with customers and the restaurant crew, and opens the doors to the kitchen so customers can see how the food is made and served.

But McDonald's continues to "face challenges" in the U.K., Roberts said. He said the company is turning to premium burgers like the Quarter Pounder Deluxe and stepping up promotions such as the Pound Saver Menu to build sales. Next week, McDonald's will push a World Cup ticket competition that customers play on their cell phones.

Despite the sales setbacks there, Roberts called the U.K. a "very profitable market," whose $200 million in operating income accounted for nearly 6% of last year's total.

The company closed 25 restaurants on major thoroughfares there because rising rents outpaced operating results, he said. McDonald's has turned over 25 of its company-owned restaurants to franchisees and has plans to do the same on another 25 to 35 stores by the end of the year.

"Our operators seemed to do a much better job of running the restaurants than we could and they did a better job of making the restaurant more locally relevant," CFO Matthew Paull said on the conference call.

Elsewhere, same-store sales were mixed. They turned strongly higher by 8.5% in Canada from last year's 2.7% dip. In the smaller division known as the Asia/Pacific, Middle East and Africa, or APMEA, comparable-store sales rose 4.1% from 5.5% a year ago while they turned up 15.4% in Latin America, on top of last year's 14.6% increase.

Operating margins in the U.S. and Europe also were pinched by higher costs for utilities, labor and promotions, mostly those for new products and the Winter Olympics.

What's more, the company turned in a 6% increase in general operating expenses that it said would rise again in the second quarter when the biennial worldwide operators' conference is held. However, it said that as a percent of revenues, general and administrative costs should decline and that costs would fall throughout the rest of the year.

Share count concerns

The share count also was a disappointment, declining only by 18 million year-over-year and 4.5 million since the fourth quarter despite the company's buy back of 29.5 million, or $1 billion worth. At least some of that was attributed to McDonald's employees exercising options in the fourth quarter of last year, the company said.

And the dollar, whose weakness had been a big boost to McDonald's results over the last three years, is showing signs of strength that are projected to hurt the bottom line during the rest of the year, according to the chain's quarterly filing with the Securities and Exchange Commission.

"By the end of the year you won't be disappointed with the share count," Paull said on the call. He refused to elaborate but added that the company is still on track to return $5 billion to $6 billion to shareholders through repurchase programs this year and next.

He conceded, however, that he was "very concerned" about the higher operating costs, but assured analysts that they will be tighter later in the year.

Results included $59.1 million, or 4.5 cents a shares, in operating expenses to cover the costs of closing 50 restaurants in the U.K. and the price to buy out litigating franchisees in Brazil.

The quarter also include $45.6 million, or 3.5 cents a share, in after-tax gains from selling shares during the initial public offering of Chipotle Mexican Grill
CMG, -0.48%

A year ago, McDonald's recorded a non-operating, after-tax gain of $178.8 million, or 13 cents a share, because of a favorable tax settlement.

The results, glimpses of which were offered last week, matched analysts' per-share expectations and were slightly ahead of the revenue projections of $5.04 billion, according to Thomson Financial.

Analysts were mostly pleased with the results, though concerned about Europe.

"The United Kingdom remains a blemish on McDonald's European face as negative same-store sales and labor issues continue to plague the company in this region," Jefferies analyst Donald Trott said in a note to clients.

Still, he said, "McDonald's appears to continue it trend of sustainable earnings growth through its product development pipeline and brand-building efforts in the U.S. and abroad."

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